State the profit maximization problem of firm, Game Theory

Assignment Help:

1. Consider two firms producing an identical product in a market where the demand is described by p = 1; 200 2Y. The corresponding cost functions are c1 (y1) = y21 and c2 (y2) = 3y22.

(a) State the profit maximization problem of firm 1 and use the first order condition to derive firm 1's reaction function.

(b) State the profit maximization problem of firm 2 and use the first order condition to derive firm 2's reaction function.

(c) Solve the system of reaction functions to identify how much each firm is producing; what is the market quantity, the market price, and the corresponding individual and collective profits.

(d) Assuming that the firms can coordinate their actions, what are the individual quantities produced the market quantity, the market price, and the resulting joint profits?

(e) How will the firms distribute the joint profits (Hint: find the minimum amount that each firm is willing to accept and the maximum amount available for each firm under the cartel agreement ). Is this form of cooperation sustainable? Explain.


Related Discussions:- State the profit maximization problem of firm

Edgeworth, Living from 1845 to 1926, Edgeworth's contributions to Economics...

Living from 1845 to 1926, Edgeworth's contributions to Economics still influence trendy game theorists. His Mathematical Psychics printed in 1881, demonstrated the notion of compet

Animal puzzle, a) This you just have to list all the attributes for the pro...

a) This you just have to list all the attributes for the program. i.e. unique id's for puzzle pieces, attributes for the puzzle like a data field for the number of edges, methods t

Payoff matrix, 1. The publishing industry in the country of Font, where the...

1. The publishing industry in the country of Font, where the local currency is the stet, is dominated by two companies, the Arial Book Co. and Verdana Works Ltd.. Currently, both o

DYnamic, saaaaaaasfffffffffffffffffffaaaczzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz...

saaaaaaasfffffffffffffffffffaaaczzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

sub game excellent nash equilibrium , A sub game excellent Nash equilibriu...

A sub game excellent Nash equilibrium is an equilibrium such that players' methods represent a Nash equilibrium in each sub game of the initial game. it should be found by backward

Heuristic, A heuristic is an aid to learning, casually brought up as a rule...

A heuristic is an aid to learning, casually brought up as a rule of thumb. Formally, a heuristic may be a mechanism capable of altering its internal model of the surroundings in re

Dominant strategy , Normal 0 false false false EN-US ...

Normal 0 false false false EN-US X-NONE X-NONE

Compute the nash equilibrium, Consider two quantity-setting firms that prod...

Consider two quantity-setting firms that produce a homogeneous good. The inverse demand function for the good is p = A - (q 1 +q 2 ). Both firms have a cost function C = q 2 (a

Auctions, what will be the best strategy for a bidder in an auction compris...

what will be the best strategy for a bidder in an auction comprised of four bidders?

Reserve worth , A reserve worth is that the minimum acceptable bid in an au...

A reserve worth is that the minimum acceptable bid in an auction. If no bidder submits a bid higher than the reserve worth, the auctioneer keeps the item offered for sale. Alternat

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd